Hyderabad metro fails to get bidders

The much-hyped Hyderabad Metro Rail Project has hit the roadblock with the pre-qualified bidders evincing least interest in submitting their financial bids before the stipulated deadline.

advertisement

A Srinivasa Rao

Hyderabad

April 19, 2010

UPDATED: April 19, 2010 08:52 IST

The much-hyped Hyderabad Metro Rail Project has hit the roadblock with the pre-qualified bidders evincing least interest in submitting their financial bids before the stipulated deadline.

The Andhra Pradesh government had earlier set April 9 as the deadline for submission of financial bids and later extended it to April 21. However, since none of the shortlisted bidders came forward till Saturday, it has extended the deadline further till June 7.

Hyderabad Metro Rail Corp managing director N. V. S. Reddy said that the date had to be extended because most of the bidders were yet to complete traffic potential studies, financial modelling and other formalities.

"There will be no further extension of the date," Reddy said.

Earlier this month, Reddy said the Rs 12,132- crore project would go as per schedule. The new concessionaire would be in place by April end and the concession agreement would be signed in the first week of May.

The works are expected to commence by October and the project would be completed in the next four years. "We don't anticipate any problem in executing the project," he said.

Sources in the municipal administration department said the bidders were apprehensive of the financial viability of the Hyderabad metro rail project. In fact, a couple of bidders recently wrote to the HMRC stating that the project was not commercially viable for various reasons such as unrealistic revenue projects from passenger traffic, possibility of escalation of project cost, inadequate viability gap funding (VGF) and drastic fall in realty value.

Sources said the project, which is proposed across three traffic corridors covering a total distance of 71.6 km with 66 stations, cannot be handled by a single consortium. The viability gap funding of Rs 4,853 crore, which is the financial support extended by the Centre and state governments to make public- private partnership projects commercially viable, is just not enough in the event of cost escalation.

"The project has to be completed in a phase-wise manner and the VGF should be released phase-wise depending on the prevailing cost. Otherwise, the government should divide it into three packages and entrust them to three different consortia by allocating separate VGF for each of them," sources said.

The bidders are also apprehensive that the projected passenger traffic of 1.5 million a day in the first year of operation might not come through. Similarly, nearly 30 per cent of the project cost has the real estate component - the developer can lease commercial spaces in the metro rail station. But in the wake of fall in real estate market, the bidder might not get the expected revenue. The project also involves large scale land acquisition and demolition of hundreds of constructions in the prime localities of Hyderabad.

The recent revival of the Telangana movement is yet another reason for the lack of interest among the bidders. Most of the companies in the consortia are owned by Andhra industrialists and they are wondering if it is worth investing huge money in the project at this stage, when the Centre is seriously looking into the demand for Telangana.

"It is better the government defers the project for some more time till the political uncertainty is removed," sources said.

The state government had to call for fresh bids after scrapping the deal with the previous consortia led by Maytas Infra following its failure to achieve financial closure in time.

Get real-time alerts and all the news on your phone with the all-new India Today app. Download from